Really!!. . .What Were They Thinking?
Enron states billions of dollars in extra revenue through aggressive accounting and complicated off-the-books partnerships managed by its own executives, all the while ignoring warnings from its employees and enriching its top executives at the expense of its investors and workforce. And it assumes none of this will ever come to light.
Business 2.0 puts Enron CEO Jeffrey Skilling on the cover of its August/September issue as a symbol of the digital revolution. A week after the issue hits newsstands, Skilling resigns from his job. In retrospect, perhaps Skilling's pose on the cover should have provided a clue.
In mid-October, Enron discloses that it has erroneously added $1 billion to its assets, despite the rigorous oversight of its auditors at Arthur Andersen. Enron takes a $1 billion charge against earnings, which prompts questions about how reliable the rest of its numbers are.
In October and November, as the scope of Enron's troubles becomes clear and its share price drops from $22 to $9, Alfred Harrison, a money manager with Alliance Capital, buys 2 million shares in the company on behalf of the Florida State Pension Fund. Indeed, he buys so many shares that he exceeds the fund's 6 percent limit on investments in one stock. He later sells the shares for 28 cents apiece. Alliance denies suggestions that its purchases of Enron have anything to do with the fact that one of Alliance's board members, Frank Savage, was also a director of Enron. Whatever the explanation, Florida fires Alliance, terminating a 17-year relationship.
As questions swirl around Enron's finances in mid-November, CEO Kenneth Lay reassures investors, "Everything we know, you know." In November, just as the scope of the financial improprieties at Enron becomes apparent, the James A. Baker III Institute gives out the Enron Prize, for distinguished public service. Its recipient: Alan Greenspan.
Richard Gross, an analyst at Lehman Bros., maintains a "strong buy" rating on Enron as the stock declines from $81 to $0.75. A Lehman spokesperson helpfully explains to the New York Times that the firm was advising Dynegy on its purchase of Enron's pipeline, and it is Lehman's policy not to change the firm's rating on any company involved in a deal in which Lehman is an adviser.
In a tearful interview on NBC's Today, Linda Lay, wife of Enron CEO Kenneth Lay, proclaims, "Everything we had was mostly in Enron stock.... We are struggling for liquidity." Reporters soon note that the Lays have $8 million in stock in other companies and $25 million in real estate holdings.
As Enron swirls into bankruptcy, it pays out $55 million in bonuses to about 500 of its employees — about $110,000 apiece — in order to retain their services. This is in stark contrast to the $4,500 severance package offered to 5,100 laid-off Enron workers.
In late January 2002, well after the government has instructed Enron to stop shredding accounting documents — Maureen Castaneda, a recently laid-off Enron employee, reveals that the shredding has continued. The tip-off: In boxing up her belongings, Castaneda finds a stash of shredded paper to use as packing material. Because the paper has been shredded horizontally instead of vertically, Castaneda can see that it consists of accounting documents.
In his testimony before Congress, Jeffrey Skilling claims that he is unable to recall a board of directors committee meeting in which records show that he had approved several partnership deals, in part because "the room was dark, quite frankly, and people were walking in and out of the meeting." Skilling also refutes charges that he "dumped" shares of Enron, by noting, "I left Enron holding about the same number of shares that I held at the beginning of 2001. On Jan. 1, 2001, the start of my final year at Enron, I owned approximately 1.1 million shares of Enron stock. On Aug. 14, the day I left, I owned about 940,000 shares of Enron stock." Apparently, the more than $3 million he received for the other 160,000 shares qualifies as rounding error.
In February 2002, as it struggles to emerge from bankruptcy, Enron pays more than $200,000 to retain its box seats and luxury suite at Enron Field. The company argues that it is making the payment solely to fulfill its contractual obligation — although, coincidentally, it had earlier failed to fulfill a $200,000-a-year commitment to fund a local Boys and Girls Club.
CNN airs a promotion for morning anchor Paula Zahn, identifying the leggy blond as "just a little sexy" to the sound of a record scratching. As the words "provocative" and "sexy" flash across the screen, a close-up shot of Zahn's lips appears.
On her first day as a newsreader for CNN's Headline News, former NYPD Blue actress Andrea Thompson ingratiates herself to viewers by announcing, "I'm Andrea Thompson, and unless you've been living in a cave, you probably already know that."
Five years after Ted Turner flips the switch on CNN/SI and declares it "a smasheroo" — and after it racks up a reported $76 million in losses and manages to penetrate just 23 percent of the nation's cable-TV-equipped homes — AOL Time Warner executives announce plans to pull the plug on the 24-hour sports-news channel.
The Newspaper Association of America names Kmart its "Retailer of the Year" on Jan. 21, 2002, one day before the company files for bankruptcy protection under Chapter 11.
Excite@Home CEO Patti Hart, to the New York Times, shortly before her company files for Chapter 11, "I don't get up in the morning and crunch numbers."
After filing for Chapter 11, declaring their intention to liquidate the company's assets, and ending health-care benefits for retirees, Polaroid executives file a request in bankruptcy court to distribute an estimated $19 million in "stay bonuses" to the company's top 45 executives.
The Fox News Channel hires Geraldo Rivera. And sends him to Afghanistan. With a camera crew. And a return ticket. Reporting live from Afghanistan, Geraldo Rivera implies that he's packing heat. "We refuse to be crime victims," Rivera says. "We're not the victim types. If they're going to get us, it's going to be in a gunfight."
During his sojourn in Afghanistan, Geraldo Rivera decries the deplorable living conditions in the town of Taloqan. Standing in front of a crowd of barefoot children, Rivera looks solemnly into the camera and states, "Look at the children. They haven't seen television or anything their whole lives."
Geraldo Rivera informs viewers that he has visited the site of a friendly-fire incident in which three American soldiers were killed. "I said the Lord's Prayer and really choked up," Rivera says. When a critic for the Baltimore Sun later points out that Rivera was, in fact, more than 100 miles away from the site of the incident, Rivera claims he was actually at the site of a different friendly-fire incident, one that has escaped the attention of the military or any other journalistic source. "This cannot stand," Rivera adds. "He has impugned my honor. It is as if he slapped me in the face and challenged me to a duel."
NBC and the World Wrestling Federation plow $100 million into creating the XFL. The March 17 game between the Birmingham Thunderbolts and the Las Vegas Outlaws scores a 1.6 Nielsen rating, believed to be the lowest ever for any prime-time network program. The league folds after one season.
Pacific Gas & Electric shores up its public image by awarding $17.5 million in retention bonuses to its executives, having already earned the public's enmity by declaring bankruptcy rather than negotiating with the government during California's electricity shortage.
NBC gives excitable superstar chef Emeril Lagasse his own sitcom, Emeril, a show so unremittingly awful that, after the pilot is shown to critics, one stands up at a press conference and asks NBC West Coast president Scott Sassa, "Can you explain how a show like Emeril has gotten as far as it has? I'm not asking that facetiously. I'm trying to understand the process." Despite the pilot's being taken in for retooling, the show is canceled after just seven episodes.
Firestone decides to fight the federal government's request that it recall some of its Wilderness AT tires. John Lampe, the CEO of the Bridgestone/Firestone unit, explains the decision to ignore the government's findings by saying, "Our consumers can drive with confidence on our tires. We're 100 percent committed to doing everything for the safety of our driving public." Three months later, Bridgestone/Firestone relents, agreeing to replace 3.5 million tires.
Facing a PR debacle after Firestone tires on Ford Explorers begin coming apart, killing 78 people and injuring hundreds more, the two companies turn on each other. Ford says Firestone tires have a higher incidence of tread separation than other tires; Firestone suggests that Ford Explorers are more likely to roll over than other SUVs. Prospective car- and tire-buyers edge warily away from the squabbling duo: Sales of Explorers drop by 16.4 percent, while Firestone's sales plunge by 40 percent.
Traffic safety consultant Sean Kane discloses that, at the behest of a group of plaintiffs' lawyers who were representing those injured in SUV accidents — his watchdog group, Strategic Safety, had begun investigating failures involving Ford vehicles and Firestone tires back in 1996. The group never alerted regulators, Kane tells the New York Times, "because a number of plaintiffs' lawyers had been burned in similar instances."
Major League Baseball commissioner Bud Selig announces the planned elimination of two teams by the start of the 2002 season. The downsizing triggers public outrage, a union grievance, a municipal lawsuit, congressional hearings, inquiries from three state attorneys general, and calls for Selig's resignation.
Global Crossing forgives two-thirds of a $15 million loan it made to newly appointed CEO John Legere when he worked for the company's Asian subsidiary. He also receives a $3.5 million signing bonus, despite the fact that he is already employed by Global Crossing. Of course, the $13.5 million is pocket change for Global Crossing founder and chairman Gary Winnick, who — despite the fact that his firm has never earned a penny of profit — has already sold $734 million worth of stock in the soon-to-be-bankrupt company.
WorldCom CEO Bernie Ebbers tells analysts that the company has paid off his margin loans. He now owes the company almost $340 million, while his company shares are worth only $120 million. Assets potentially up for sale: his villa in Vail, Colo., and his 164,000-acre spread in British Columbia, Douglas Lake Ranch, bought in 1998 for a reported $67 million. Meanwhile, to conserve cash, WorldCom cuts off employees' coffee supplies and stops subsidizing their home long-distance bills.
And Finally: Enron Field, CMGI Field, PSINet Stadium, and Conseco Fieldhouse.
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